{"id":806,"date":"2015-12-19T12:16:32","date_gmt":"2015-12-19T06:46:32","guid":{"rendered":"http:\/\/carajput.com\/blog\/?p=806"},"modified":"2026-03-24T19:08:26","modified_gmt":"2026-03-24T13:38:26","slug":"corporate-and-professional-update-december-14-2015","status":"publish","type":"post","link":"https:\/\/carajput.com\/blog\/corporate-and-professional-update-december-14-2015\/","title":{"rendered":"What is compounding of contraventions under FEMA?"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_58 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Page Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69e59f4e9080f\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #000000;color:#000000\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #000000;color:#000000\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69e59f4e9080f\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-1'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/carajput.com\/blog\/corporate-and-professional-update-december-14-2015\/#COMPOUNDING_POWER_OF_RBI\" title=\"COMPOUNDING POWER OF RBI\">COMPOUNDING POWER OF RBI<\/a><ul class='ez-toc-list-level-2'><li class='ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/carajput.com\/blog\/corporate-and-professional-update-december-14-2015\/#DELEGATION_OF_POWER_TO_REGIONAL_AND_HEADQUARTERS\" title=\"DELEGATION OF POWER TO REGIONAL AND\u00a0HEADQUARTERS\">DELEGATION OF POWER TO REGIONAL AND\u00a0HEADQUARTERS<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-1'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/carajput.com\/blog\/corporate-and-professional-update-december-14-2015\/#TYPES_OF_CONTRAVENTIONS\" title=\"TYPES OF CONTRAVENTIONS\">TYPES OF CONTRAVENTIONS<\/a><ul class='ez-toc-list-level-2'><li class='ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/carajput.com\/blog\/corporate-and-professional-update-december-14-2015\/#PROCEDURE_FOR_COMPOUNDING_OF_OFFENCES_UNDER_FEMA\" title=\"PROCEDURE FOR COMPOUNDING OF OFFENCES UNDER FEMA\">PROCEDURE FOR COMPOUNDING OF OFFENCES UNDER FEMA<\/a><ul class='ez-toc-list-level-3'><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/carajput.com\/blog\/corporate-and-professional-update-december-14-2015\/#ELIGIBLE_PERSON_MAKING_APPLICATION_FOR_COMPOUNDING_UNDER_FEMA\" title=\"ELIGIBLE PERSON MAKING APPLICATION FOR COMPOUNDING UNDER FEMA\">ELIGIBLE PERSON MAKING APPLICATION FOR COMPOUNDING UNDER FEMA<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/carajput.com\/blog\/corporate-and-professional-update-december-14-2015\/#TIME_FOR_MAKING_APPLICATION_FOR_COMPOUNDING_UNDER_FEMA\" title=\"TIME FOR MAKING APPLICATION FOR COMPOUNDING UNDER FEMA\">TIME FOR MAKING APPLICATION FOR COMPOUNDING UNDER FEMA<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/carajput.com\/blog\/corporate-and-professional-update-december-14-2015\/#PREREQUISITES_COMPOUNDING_OF_CONTRAVENTIONS_UNDER_FEMA\" title=\"PREREQUISITES COMPOUNDING OF CONTRAVENTIONS UNDER FEMA\">PREREQUISITES COMPOUNDING OF CONTRAVENTIONS UNDER FEMA<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/carajput.com\/blog\/corporate-and-professional-update-december-14-2015\/#METHOD_OF_COMPOUNDING_UNDER_FEMA\" title=\"METHOD OF COMPOUNDING UNDER FEMA\">METHOD OF COMPOUNDING UNDER FEMA<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/carajput.com\/blog\/corporate-and-professional-update-december-14-2015\/#LEGAL_EFFECT_OF_COMPOUNDING\" title=\"LEGAL EFFECT OF COMPOUNDING \">LEGAL EFFECT OF COMPOUNDING <\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/carajput.com\/blog\/corporate-and-professional-update-december-14-2015\/#CONTRAVENTIONS_ATTRACTING_PENALTIES\" title=\"CONTRAVENTIONS ATTRACTING PENALTIES\">CONTRAVENTIONS ATTRACTING PENALTIES<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/carajput.com\/blog\/corporate-and-professional-update-december-14-2015\/#NATURE_OF_PROCEEDINGS_UNDER_FEMA_FOR_COMPOUNDING\" title=\"NATURE OF PROCEEDINGS UNDER FEMA FOR COMPOUNDING\">NATURE OF PROCEEDINGS UNDER FEMA FOR COMPOUNDING<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/carajput.com\/blog\/corporate-and-professional-update-december-14-2015\/#CEILING_LIMIT_ON_PENALTY_UNDER_COMPOUNDING\" title=\"CEILING LIMIT ON PENALTY UNDER COMPOUNDING \">CEILING LIMIT ON PENALTY UNDER COMPOUNDING <\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/carajput.com\/blog\/corporate-and-professional-update-december-14-2015\/#PROSECUTION\" title=\"PROSECUTION\">PROSECUTION<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/carajput.com\/blog\/corporate-and-professional-update-december-14-2015\/#DOS_AND_DONTS_OF_COMPOUNDING_OF_OFFENCES\" title=\"DO\u2019S AND DON\u2019TS OF COMPOUNDING OF OFFENCES \">DO\u2019S AND DON\u2019TS OF COMPOUNDING OF OFFENCES <\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/carajput.com\/blog\/corporate-and-professional-update-december-14-2015\/#APPLICATION_FOR_FEMA_COMPOUNDING\" title=\"APPLICATION FOR FEMA COMPOUNDING\">APPLICATION FOR FEMA COMPOUNDING<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/carajput.com\/blog\/corporate-and-professional-update-december-14-2015\/#Summary_FEMARBI_Compliance_Checklist\" title=\"Summary FEMA\/RBI Compliance Checklist\">Summary FEMA\/RBI Compliance Checklist<\/a><ul class='ez-toc-list-level-4'><li class='ez-toc-heading-level-4'><ul class='ez-toc-list-level-4'><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/carajput.com\/blog\/corporate-and-professional-update-december-14-2015\/#Conclusion\" title=\"Conclusion\">Conclusion<\/a><\/li><\/ul><\/li><\/ul><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<figure id=\"attachment_13312\" aria-describedby=\"caption-attachment-13312\" style=\"width: 977px\" class=\"wp-caption alignnone\"><a href=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2015\/12\/Compounding-of-offences-under-FEMA.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\" wp-image-13312\" src=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2015\/12\/Compounding-of-offences-under-FEMA.jpg\" alt=\"Compounding-of-offences-under-FEMA Act \" width=\"977\" height=\"463\" srcset=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2015\/12\/Compounding-of-offences-under-FEMA.jpg 667w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2015\/12\/Compounding-of-offences-under-FEMA-300x142.jpg 300w\" sizes=\"(max-width: 977px) 100vw, 977px\" \/><\/a><figcaption id=\"caption-attachment-13312\" class=\"wp-caption-text\"><span style=\"color: #ffffff;\">Compounding-of-offences-under-FEMA Act<\/span><\/figcaption><\/figure>\n<p><span style=\"color: #000080;\"><strong>BRIEF INTRODUCTION<\/strong><\/span><\/p>\n<p>The\u00a0Foreign Exchange\u00a0Management Act, 1999 (<a href=\"https:\/\/carajput.com\/blog\/tag\/foreign-exchange-management-act-fema\/\">FEMA<\/a>) is an act of the Parliament of India to consolidate and amend the laws\u00a0regarding\u00a0exchange\u00a0with\u00a0the target\u00a0of facilitating external trade &amp; payments and promoting the orderly development and maintenance of\u00a0exchange\u00a0market in India.<\/p>\n<p>Contravention\u00a0may be a\u00a0breach or non-compliance of the provisions of\u00a0The\u00a0Foreign Exchange\u00a0Management Act, 1999 (FEMA),\u00a0and therefore the\u00a0rules, regulations, notifications, orders or circulars or directions made thereunder.<\/p>\n<p>RBI has been vested with the power to compound offences under The\u00a0Foreign Exchange\u00a0Management Act, 1999 (FEMA) and in case a contravention arises under Section 13 of the Act, the same be\u00a0compounded within\u00a0100\u00a0and eighty days (180) from the date on which the officer of RBI receives the application for compounding.<\/p>\n<p>Anyone\u00a0who contravenes the provisions of the\u00a0touch on\u00a0adjudication, is\u00a0susceptible to\u00a0pay \u2013<\/p>\n<ul>\n<li><span style=\"color: #ff6600;\"><strong>Thrice the sum involved in such contravention where the quantity is quantifiable, or;<\/strong><\/span><\/li>\n<\/ul>\n<ul>\n<li><span style=\"color: #ff6600;\"><strong>Rupees 2 Lakhs, where\u00a0the quantity\u00a0isn&#8217;t\u00a0directly quantifiable;<\/strong><\/span><\/li>\n<\/ul>\n<p>and where the contravention is of\u00a0an unbroken\u00a0nature,\u00a0an extra\u00a0penalty of Rupees Five Thousand\u00a0for each\u00a0day after\u00a0the primary\u00a0day during which the contravention continues.<\/p>\n<p>Furthermore, as per the Section 15 of the Act, it was provided under the Compounding of Contravention, that where the contravener voluntarily admits contravention, pleads guilty and seeks redressal, the same shall file an application for compounding.<\/p>\n<p>Section 15 of\u00a0Foreign Exchange\u00a0Management Act (<a href=\"https:\/\/www.caindelhiindia.com\/blog\/basic-about-non-resident-indians-under-fema-and-income-tax-2\/\">FEMA<\/a>), 1999 empowers\u00a0bank\u00a0of India to compound any contravention made under Section 13 of FEMA, 1999 except the contraventions under section 3(a).<\/p>\n<p>Compounding refers to\u00a0the method\u00a0of admitting voluntarily the breach of any of the provisions of The\u00a0Foreign Exchange\u00a0Management Act, 1999 (FEMA) or the rules\/regulations\/notifications\/orders\/directions or the circulars issued under the said Act.<\/p>\n<p>The person, admitting the contravening the provisions, shall make a request for compounding his mistakes.<\/p>\n<p>This would indeed provide and protect such person from legal proceedings and makes\u00a0the method\u00a0simple and fast. The offence shall be compounded within 180 days from the date on which the requisite officer receives the application for compounding.<\/p>\n<h1><span class=\"ez-toc-section\" id=\"COMPOUNDING_POWER_OF_RBI\"><\/span><span style=\"color: #000080;\"><strong>COMPOUNDING POWER OF RBI<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h1>\n<p>Any default\/contravention in respect of any provision of The\u00a0Foreign Exchange\u00a0Management Act, 1999 (FEMA) shall be compounded by following officers, under the direction and supervision of the Governor of RBI.<\/p>\n<table style=\"height: 429px;\" width=\"928\">\n<tbody>\n<tr>\n<td><strong><span style=\"color: #000080;\">AMOUNT OF CONTRAVENTION FOR COMPOUNDING<\/span><\/strong><\/td>\n<td><strong><span style=\"color: #000080;\">COMPOUNDING AUTHORITY OF RBI<\/span><\/strong><\/td>\n<\/tr>\n<tr>\n<td>UPTO RS 10 LAKHS<\/td>\n<td>ASSISTANT GENERAL MANAGER<\/td>\n<\/tr>\n<tr>\n<td>MORE THAN RS 10 LAKHS, BUT LESS THAN RS 40 LAKHS<\/td>\n<td>DEPUTY GENERAL MANAGER<\/td>\n<\/tr>\n<tr>\n<td>RS 40 LAKHS AND ABOVE, BUT LESS THAN RS 100 LAKHS<\/td>\n<td>GENERAL MANAGER<\/td>\n<\/tr>\n<tr>\n<td>RS 100 LAKHS AND ABOVE<\/td>\n<td>CHIEF GENERAL MANAGER<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>It is to be noted that compounding provisions shall be applicable only in case of quantifiable contravention only.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"DELEGATION_OF_POWER_TO_REGIONAL_AND_HEADQUARTERS\"><\/span><span style=\"color: #000080;\"><strong>DELEGATION OF POWER TO REGIONAL AND\u00a0HEADQUARTERS<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<figure id=\"attachment_13309\" aria-describedby=\"caption-attachment-13309\" style=\"width: 931px\" class=\"wp-caption alignnone\"><a href=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2015\/12\/FEMA.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\" wp-image-13309\" src=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2015\/12\/FEMA.jpg\" alt=\"FEMA\" width=\"931\" height=\"1038\" srcset=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2015\/12\/FEMA.jpg 594w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2015\/12\/FEMA-269x300.jpg 269w\" sizes=\"(max-width: 931px) 100vw, 931px\" \/><\/a><figcaption id=\"caption-attachment-13309\" class=\"wp-caption-text\">FEMA<\/figcaption><\/figure>\n<p>With a view to relax and simplify the process of handling operational issues and customer service, <a href=\"https:\/\/carajput.com\/blog\/tag\/rbi\/\">RBI<\/a> provided for segregation of compounding powers between Regional and Central level.<\/p>\n<p>For Instance &#8211; Kochi and Panaji Regional offices are eligible to compound contraventions, where the amount involved is less than\u00a0Rs 100 Lakhs.<\/p>\n<p>However, where the said amount is RS 100 Lakhs and above in Panaji and Kochi, the compounding will be handled at Mumbai RO and Thiruvananthapuram RO respectively.<\/p>\n<p>Apart from the contraventions\u00a0laid out in\u00a0particular, application for all other contraventions\u00a0needs to\u00a0be submitted to\u00a0Foreign Exchange\u00a0Department, RBI, Mumbai.<\/p>\n<h1><span class=\"ez-toc-section\" id=\"TYPES_OF_CONTRAVENTIONS\"><\/span><span style=\"color: #000080;\"><strong>TYPES OF CONTRAVENTIONS<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h1>\n<p>The type of contravention\u00a0is decided\u00a0to stay\u00a0seeable\u00a0the subsequent\u00a0indicative points:<\/p>\n<ol>\n<li>Is the contravention being technical and\/or minor in nature\u00a0and desires\u00a0only an administrative cautionary advice;<\/li>\n<li>Is the contravention being serious in nature and warrants compounding of the contravention; and<\/li>\n<li>Is the contravention,\u00a0clear, involves\u00a0concealing, national and security concerns involving serious infringement of the regulatory framework.<\/li>\n<\/ol>\n<p style=\"padding-left: 40px;\">Thus, the RBI provides for segregation and categorization of the contraventions as provided above and thus, both the contravener and any other person will not have any right to classify the contravention as technical Suo moto.<\/p>\n<ol start=\"4\">\n<li>The\u00a0banking company\u00a0makes a scrutiny of\u00a0the applying\u00a0to verify whether\u00a0the specified\u00a0details and documents furnished by the applicant are prima-facie\u00a0so as.<\/li>\n<li>Applications\u00a0are\u00a0returned to the applicant if it\u2019s submitted with incomplete details or where the contravention\u00a0isn&#8217;t\u00a0admitted.<\/li>\n<li>On the receipt of applications, the RBI will examine\u00a0and choose\u00a0if the contravention is technical, material or sensitive in nature.<\/li>\n<li>The applicant is going to be issued a cautionary advice, if technical.<\/li>\n<li>If the contravention is material, it&#8217;ll be compounded by imposing a penalty after giving a chance to the contravener to look before the compounding authority for a private hearing.<\/li>\n<li>the identical would be named the Directorate of Enforcement (DoE) for further investigation\/ action if the contravention is sensitive in nature requiring further investigations.<\/li>\n<\/ol>\n<h2><span class=\"ez-toc-section\" id=\"PROCEDURE_FOR_COMPOUNDING_OF_OFFENCES_UNDER_FEMA\"><\/span><span style=\"color: #ff9900;\"><strong>PROCEDURE FOR COMPOUNDING OF OFFENCES UNDER FEMA<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<h3><span class=\"ez-toc-section\" id=\"ELIGIBLE_PERSON_MAKING_APPLICATION_FOR_COMPOUNDING_UNDER_FEMA\"><\/span><span style=\"color: #000080;\"><strong>ELIGIBLE PERSON <\/strong><strong>MAKING APPLICATION FOR COMPOUNDING UNDER FEMA<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>A person contravening any of the provision of the FEMA, 1999 [excluding section 3(a)] or any of the rule, regulation, notification, direction or contravenes any of the conditions associated with\u00a0which a consent is issued by the\u00a0banking concern, can apply for compounding to the\u00a0depository financial institution.<\/li>\n<li>Applications searching for compounding of contraventions under section 3(a) of The Foreign Exchange Management Act, 1999 (FEMA) is also submitted to the Directorate of Enforcement.<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"TIME_FOR_MAKING_APPLICATION_FOR_COMPOUNDING_UNDER_FEMA\"><\/span><span style=\"color: #000080;\"><strong>TIME FOR MAKING APPLICATION FOR COMPOUNDING UNDER FEMA<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>On receiving the Notice \u2013 When\u00a0someone\u00a0is created\u00a0attentive to\u00a0the contravention of the provisions of The\u00a0Foreign Exchange\u00a0Management Act, 1999 (FEMA) by the\u00a0banking concern\u00a0or the Foreign Investment Promotion Board (FIPB) or\u00a0the other\u00a0statutory authority.<\/li>\n<li>Suo Moto \u2013 A person may also file an application for compounding, in case of Suo moto, i.e., having become conscious about\u00a0the contravention.<\/li>\n<li>Undertaking Due diligence and proactively filing for compounding under The Foreign Exchange Management Act, 1999 (FEMA)<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"PREREQUISITES_COMPOUNDING_OF_CONTRAVENTIONS_UNDER_FEMA\"><\/span><span style=\"color: #000080;\"><strong>PREREQUISITES COMPOUNDING OF CONTRAVENTIONS UNDER FEMA<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ol>\n<li>For a period of three years from the date of compounding of contravention, no contraventions of\u00a0an analogous\u00a0kind\u00a0will be\u00a0compounded. Post such duration, if\u00a0a violation\u00a0like\u00a0the previous nature occurs,\u00a0the identical\u00a0shall be compounded as if it were\u00a0the primary\u00a0contravention.<\/li>\n<li>For the contraventions to be compounded for transactions where prior approval of statutory authorities\/Government is required to be obtained, and such approval has not been obtained, then the compounding of such a contravention shall not be ordered till the applicant obtains the requisite approval(s) from the governing authority.<\/li>\n<li>In event the contravener has\u00a0didn&#8217;t\u00a0pay the sum of contravention for compounding within\u00a0the desired\u00a0limit\u00a0or has serious contravention suspected\u00a0of cash\u00a0laundering, terror financing or affecting sovereignty and integrity of\u00a0the state, the case\u00a0is sufficiently\u00a0required to be\u00a0observed\u00a0the Directorate of Enforcement for further investigation.<\/li>\n<li>Any necessary action under the Act or any authority under the Prevention\u00a0of cash\u00a0Laundering Act or other agencies\u00a0also can\u00a0take the requisite actions as\u00a0is also\u00a0deemed fit.<\/li>\n<li>In cases where the adjudication\u00a0is completed\u00a0by the Directorate of Enforcement and appeals\u00a0are\u00a0made under the Section 17 or Section 19 of FEMA, no compounding of contravention is allowed under Rule 11 of the\u00a0Foreign Exchange\u00a0(Compounding Proceedings) Rules, 2000 (\u2018Rules\u2019).<\/li>\n<li>The contravener\u00a0must\u00a0specifically state\u00a0within the\u00a0manner prescribed in Annexure III\u00a0together with\u00a0the compounding application that he has not filed any such appeals<\/li>\n<li>Where any contravention\u00a0that&#8217;s\u00a0identified by the RBI or has been brought forward by the contravener itself, the Bank\u00a0has got to\u00a0confirm\u00a0the subsequent\u00a0\u2013<\/li>\n<\/ol>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li>Whether\u00a0it&#8217;s\u00a0material and\u00a0it&#8217;s\u00a0required to be compounded and if\u00a0the required\u00a0procedure has been followed.<\/li>\n<li>Whether the contravention is of a sensitive nature and if the identical should learn to the Directorate of Enforcement<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"METHOD_OF_COMPOUNDING_UNDER_FEMA\"><\/span><span style=\"color: #000080;\"><strong>METHOD OF COMPOUNDING UNDER FEMA<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The RBI is guided by the provisions of section 13 of FEMA, whereby\u00a0it&#8217;s\u00a0said that\u00a0the number\u00a0imposed\u00a0will be\u00a0up\u00a0to 3\u00a0times\u00a0the number\u00a0involved\u00a0within the\u00a0contravention. However,\u00a0the number\u00a0imposed is calculated on\u00a0the premise\u00a0of guidance note and which\u00a0is additionally\u00a0available on the RBI\u2019s website for information of\u00a0the overall\u00a0public.<\/p>\n<p>However, the guidance note is barely for the aim of indicating the premise on which the quantity to be imposed comes by the compounding authorities.<\/p>\n<p>the particular amount imposed may sometimes diverge, reckoning on the situations of the case taking into consideration the subsequent factors:<\/p>\n<ul>\n<li>The quantifiable amount of gain or unfair advantage, which the contravener has made, by contravening the provisions.<\/li>\n<li>Due to contravention\u00a0the quantity\u00a0of loss caused by any authority\/ agency\/ exchequer.<\/li>\n<li>The number of economic benefits that has accrued to the contravener, by delaying or avoiding the compliances.<\/li>\n<li>The repetitive nature of such contravention, along with the history of non-compliance by the contravener during the past years.<\/li>\n<li>Contravener\u2019s conduct in undertaking the transaction and within the disclosure of full facts within the application and submissions made during the private hearing; and the other factor as considered relevant and appropriate.<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"LEGAL_EFFECT_OF_COMPOUNDING\"><\/span><span style=\"color: #000080;\"><strong>LEGAL EFFECT OF COMPOUNDING <\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>No further penalty or proceedings on\u00a0the problems\u00a0compounded<\/li>\n<li>All the proceeding being pending against the applicant shall be taken on record.<\/li>\n<li>All contraventions compounded stands regularized<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"CONTRAVENTIONS_ATTRACTING_PENALTIES\"><\/span><span style=\"color: #000080;\"><strong>CONTRAVENTIONS ATTRACTING PENALTIES<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>Contravention of the Act.<\/li>\n<li>Contravention of Rules, Regulations.<\/li>\n<li>Contraventions of any of the conditions<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"NATURE_OF_PROCEEDINGS_UNDER_FEMA_FOR_COMPOUNDING\"><\/span><span style=\"color: #000080;\"><strong>NATURE OF PROCEEDINGS UNDER FEMA FOR COMPOUNDING<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>Penalty Proceedings not criminal in nature.<\/li>\n<li>Penalty\u00a0can&#8217;t be\u00a0supported\u00a0guesswork, conjecture or surmise<\/li>\n<li>The powers that have been vested with the enforcement officers have been classified as quasi-judicial.<\/li>\n<li>The doctrine of prosecution \u2013 Punishment by the imposition of a penalty also as imprisonment for non-payment of penalty wouldn&#8217;t amount to prosecution.<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"CEILING_LIMIT_ON_PENALTY_UNDER_COMPOUNDING\"><\/span><span style=\"color: #000080;\"><strong>CEILING LIMIT ON PENALTY UNDER COMPOUNDING <\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ol>\n<li>Sum involved is quantifiable- &#8211; -Up to 3 times of the sum involved within the contravention.<\/li>\n<li>Sum involved isn&#8217;t quantifiable- &#8211; &#8211; Up to \u20b9 2 Lakhs only<\/li>\n<li>Apart from the above-mentioned penalty, the contravener shall be liable for a recurring penalty of \u20b9 5,000 for every day of continuing default.<\/li>\n<\/ol>\n<h3><span class=\"ez-toc-section\" id=\"PROSECUTION\"><\/span><span style=\"color: #000080;\"><strong>PROSECUTION<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>The penalty has been paid \u2013 no prosecution\u00a0is often\u00a0initiated.<\/li>\n<li>The penalty\u00a0isn&#8217;t\u00a0paid \u2013 prosecution\u00a0may be\u00a0initiated.<\/li>\n<li>No specified cut-off date for the imposition of penalty.<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"DOS_AND_DONTS_OF_COMPOUNDING_OF_OFFENCES\"><\/span><span style=\"color: #000080;\"><strong>DO\u2019S AND DON\u2019TS OF COMPOUNDING OF OFFENCES <\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>Spell out each contravention correctly<\/li>\n<li>Give\u00a0the explanations\u00a0of contravention<\/li>\n<li>Amount of penalty be applicable for each kind of contravention.<\/li>\n<li>The period for which such contravention continued.<\/li>\n<li>Where any default is identified after making application, the applicant is required to request for modification of application already submitted.<\/li>\n<li>All the supporting documents related to contravention be properly enclosed with the application.<\/li>\n<li>All the required papers be kept ready before the day of hearing, since no adjournments is provided under this Act.<\/li>\n<li>The language of\u00a0the appliance\u00a0should be polite\u00a0and therefore the\u00a0content should give the message of accepting the default<\/li>\n<li>No arguments at the time of hearing but informing about\u00a0things\u00a0and circumstances that\u00a0cause\u00a0contravention<\/li>\n<li>The applicant shall not cite any previous case laws.<\/li>\n<li>Also, the application shall not state any previous order be passed under any identical case.<\/li>\n<li>A Letter of Authority shall also be submitted on a plain paper.<\/li>\n<li>Not to irritate the authority<\/li>\n<li>Plead ignorance<\/li>\n<\/ul>\n<h2><span class=\"ez-toc-section\" id=\"APPLICATION_FOR_FEMA_COMPOUNDING\"><\/span><span style=\"color: #000080;\"><strong>APPLICATION FOR FEMA COMPOUNDING<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>An application for Compounding\u00a0together with\u00a0necessary documents and\u00a0a requirement\u00a0draft for Rs. 5000\/- (Rupees five thousand only) drawn in favor of the \u201cReserve Bank of India\u201d\u00a0within the\u00a0prescribed format shall be sent to the RBI.<\/p>\n<p>the applying\u00a0must contain pertinent details\u00a0like, contact details, name of the applicant, the authorized official or representative of the applicant and email ID.<\/p>\n<p>additionally\u00a0to\u00a0the appliance, the applicant must also furnish details\u00a0within the\u00a0format of Annex II of\u00a0the foundations\u00a0referring to\u00a0Foreign Direct Investment, External Commercial Borrowings, Overseas Direct Investment and Branch Office \/ Liaison Office, as applicable,\u00a0together with\u00a0the Memorandum of Association of\u00a0the corporate.<\/p>\n<p>Also\u00a0the most recent\u00a0audited\u00a0record\u00a0together with\u00a0an undertaking as per Annex-III of\u00a0the principles\u00a0must be attached stating that the applicant\u00a0isn&#8217;t\u00a0under any enquiry or investigation by any agency\u00a0like\u00a0the Directorate of Enforcement etc., as on the date of such application.<\/p>\n<p>Where the applicant has not provided adequate details or where\u00a0the desired\u00a0approvals\u00a0haven&#8217;t\u00a0been obtained,\u00a0the appliance\u00a0so received by the RBI\u00a0together with\u00a0the applying\u00a0fees of INR 5000 shall be returned and refunded by way of crediting\u00a0the quantity\u00a0to the applicant\u2019s account through NEFT<\/p>\n<p>As per the ECS mandate and details of their checking account per Annex-IV of the foundations furnished together with the applying.<\/p>\n<p>Application must be made\u00a0within the\u00a0prescribed format containing the contact details i.e. the name of the applicant or his authorized official or representative of the applicant, telephone or mobile number\u00a0together with\u00a0the e-mail\u00a0ID.<\/p>\n<p>other than\u00a0the applying\u00a0in prescribed format, following documents must\u00a0even be\u00a0furnished:<\/p>\n<ul>\n<li>Details as per Annex II\u00a0referring to\u00a0Foreign Direct Investment, External Commercial Borrowings, Overseas Direct Investment and Branch Office\/ Liaison Office<\/li>\n<li>Copy of Memorandum of Association<\/li>\n<li>Latest Audited\u00a0record\u00a0together with\u00a0an undertaking as per Annex III that\u00a0they&#8217;re\u00a0not under any enquiry\/ investigation\/ adjudication by any agency like Directorate of Enforcement, CBI etc.<\/li>\n<li>as on the date of application. Also, the applicant should inform the compounding Authority \/ RBI if any such proceedings are initiated after filing\u00a0the applying\u00a0but on or before the date of issuance of the compounding order<\/li>\n<\/ul>\n<p>If\u00a0the applying\u00a0for compounding\u00a0isn&#8217;t\u00a0filed\u00a0within the\u00a0prescribed format or the mandatory details, documents or declarations are missing or\u00a0the applying\u00a0is filed without the demand draft towards\u00a0the applying\u00a0fees,\u00a0it&#8217;ll\u00a0not be processed\u00a0and can\u00a0be returned to the applicant.<\/p>\n<p>Once\u00a0the appliance\u00a0is completed\u00a0altogether\u00a0aspects within the given time then date of such submission\u00a0is going to be\u00a0considered\u00a0because the\u00a0date of receipt of application and shall be processed accordingly.<\/p>\n<p>Serious contraventions i.e. contraventions involving\u00a0concealment, terror financing or anything affecting sovereignty and integrity of\u00a0the state\u00a0or the cases<\/p>\n<p>where applicant fails to pay the sum\u00a0that\u00a0compounding order was passed within\u00a0the required\u00a0fundamental quantity\u00a0shall be directly\u00a0stated\u00a0Directorate of Enforcement for further investigation and necessary actions would be taken accordingly.<\/p>\n<p>If the applicant again commits some contravention within the amount of three years which is comparable to the contravention that a compounding order has already been passed.<\/p>\n<p>It shall not be compounded again and provisions of FEMA, 1999 shall prevail. Any contravention after the expiry of the amount of three years shall be considered for compounding.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Summary_FEMARBI_Compliance_Checklist\"><\/span><span style=\"color: #000080;\"><strong>Summary FEMA\/RBI Compliance Checklist<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-31578\" src=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2015\/12\/FEMA-Compliances_page-0001-1-scaled.jpg\" alt=\"Summary FEMA\/RBI Compliance Checklist\" width=\"2560\" height=\"1203\" srcset=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2015\/12\/FEMA-Compliances_page-0001-1-scaled.jpg 2560w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2015\/12\/FEMA-Compliances_page-0001-1-300x141.jpg 300w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2015\/12\/FEMA-Compliances_page-0001-1-1024x481.jpg 1024w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2015\/12\/FEMA-Compliances_page-0001-1-768x361.jpg 768w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2015\/12\/FEMA-Compliances_page-0001-1-1536x722.jpg 1536w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2015\/12\/FEMA-Compliances_page-0001-1-2048x962.jpg 2048w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2015\/12\/FEMA-Compliances_page-0001-1-800x376.jpg 800w\" sizes=\"(max-width: 2560px) 100vw, 2560px\" \/><\/p>\n<ol>\n<li>FLA Return (FLA)\n<ul>\n<li>Due Date: 15 July every year (extended to 31 July 2025)<\/li>\n<li>Applicability: Companies that have received FDI or made overseas investments in any previous year<\/li>\n<li>Purpose: Reporting of foreign liabilities and assets<\/li>\n<\/ul>\n<\/li>\n<li>FC-GPR\n<ul>\n<li>Timeline: Within 30 days from the date of issue of capital instruments<\/li>\n<li>Trigger Event: When an Indian company receives FDI and allots shares to a non-resident<\/li>\n<\/ul>\n<\/li>\n<li>FC-TRS\n<ul>\n<li>Timeline: Within 60 days from the date of transfer or receipt of consideration<\/li>\n<li>Trigger Event: Transfer of shares\/securities between a resident and a non-resident (both directions)<\/li>\n<\/ul>\n<\/li>\n<li>FDI-LLP-I\n<ul>\n<li>Timeline: Within 30 days of receiving consideration<\/li>\n<li>Trigger Event: LLP receiving capital contribution, profit share, or fresh investment from a non-resident<\/li>\n<\/ul>\n<\/li>\n<li>FDI-LLP-II\n<ul>\n<li>Timeline: Within 60 days of receipt of funds<\/li>\n<li>Trigger Event: Disinvestment\/transfer of capital contribution or profit share from resident to non-resident<\/li>\n<li>Mode: Reporting through FDI-LLP-II<\/li>\n<\/ul>\n<\/li>\n<li>ECB-2 Return\n<ul>\n<li>Timeline: Within 7 working days from the end of each month<\/li>\n<li>Applicability: Companies having an active ECB under FEMA, 1999<\/li>\n<li>Purpose: Monthly reporting of ECB transactions<\/li>\n<\/ul>\n<\/li>\n<\/ol>\n<h4><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span><span style=\"color: #ff9900;\"><strong>Conclusion<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p>Coordination with RBI is a difficult undertaking, but with the passage of time, RBI has made significant attempts to bridge this gap.<\/p>\n<p>Today, RBI&#8217;s every move is in this direction. A good example is the consolidated Master Circular for each subject matter.<\/p>\n<p>which is issued annually or half-yearly and compiles all of the alterations or circulars issued throughout the year into one document to give the concerned persons easy access and comfort while dealing with it, and which also served as the foundation for this article.<\/p>\n<p style=\"text-align: justify;\">For query or help, contact:\u00a0<a href=\"mailto:singh@carajput.com\">singh@carajput.com<\/a>\u00a0or call at 9555555480<\/p>\n","protected":false},"excerpt":{"rendered":"<p>BRIEF INTRODUCTION The\u00a0Foreign Exchange\u00a0Management Act, 1999 (FEMA) is an act of the Parliament of India to consolidate and amend the laws\u00a0regarding\u00a0exchange\u00a0with\u00a0the target\u00a0of facilitating external trade &amp; payments and promoting the orderly development and maintenance of\u00a0exchange\u00a0market in India. Contravention\u00a0may be a\u00a0breach or non-compliance of the provisions of\u00a0The\u00a0Foreign Exchange\u00a0Management Act, 1999 (FEMA),\u00a0and therefore the\u00a0rules, regulations, notifications, orders &hellip;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[9977],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts\/806"}],"collection":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/comments?post=806"}],"version-history":[{"count":4,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts\/806\/revisions"}],"predecessor-version":[{"id":31579,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts\/806\/revisions\/31579"}],"wp:attachment":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/media?parent=806"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/categories?post=806"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/tags?post=806"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}